Arch Capital Group Ltd. · NASDAQ:ACGL
Arch Capital — Merger or Acquisition (August 2016)
13 slides from Arch Capital's merger presentation, Aug 16, 2016
Slide 1: Informational Statements
2 Informational Statements The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward looking statements. This presentation or any other written or oral statements made by or on behalf of Arch Capital Group Ltd. and its subsidiaries (“Arch”) may include forward looking
Slide 2: Acquisition of United Guaranty Corporation: A New Milestone in Arch's Development
Acquisition of (i) United Guaranty Corp. (“UGC”), the market leader in the Private Mortgage Insurance Industry, and (ii) Quota Share reinsurance between UGC and AIG, for approximately $3.42 billion(1) in cash and stock. Expected closing in 4Q 2016 or 1Q 2017 3 Consolidates Arch as a leading specialt
Slide 3: Acquisition of UGC: The Market Leader and a High-Quality Business Platform
4 Customer-Oriented Business Model Long-standing relationships with many of the nation’s largest and highest quality lenders One of the largest national sales forces in the industry Active relationships with over 1,800 customers Innovative Approach Innovative use of risk-based pricing models First i
Slide 4: Leadership position in the highly profitable U.S. Mortgage Insurance sector
5 Leadership position in the highly profitable U.S. Mortgage Insurance sector Combined insurance in-force of $293 billion and $1.4 billion of premiums written Financial strength provides clear competitive advantage Arch’s ratings and capitalization are superior to any other competitor in the MI spac
Slide 5: Both Arch and UGC recognized as innovators in the mortgage insurance sector
6 Both Arch and UGC recognized as innovators in the mortgage insurance sector UGC a first mover in the use of capital markets technology with Bellemeade I & II Arch a first mover in GSE credit risk transfer structures UGC and Arch are the first two mortgage insurers utilizing risk-based pricing Comb
Slide 6: Arch financial performance and pro forma metrics
7 Source: Company filings, SNL Financial. Note: Metrics as of LTM 6/30/16 unless otherwise noted. (1) Represents tangible book value per share plus dividend 12-year CAGR as of 12/31/2015. (2) Represents combined ratio volatility for 12 year period ending 12/31/2015, defined as standard deviation div
Slide 7: The Arch Way: Market Cycle Management
8 The Arch Way: Market Cycle Management Key Management Principles Arch has a demonstrable and respected history of effectively managing cycles Arch manages the cycle within and between each platform to maximize earnings and reduce risk Mortgage, like P&C, is managed on the front-end (customer facing
Slide 8: Enhanced earnings power and capital generation through increased scale and diversification
9 Enhanced earnings power and capital generation through increased scale and diversification Meaningful reinsurance synergies through retention by Arch of UGC’s internal quota share for future origination Existing agreement to be terminated on a run-off basis If transaction closes in 2017, Arch will
Slide 9: Key Transaction Terms
10 Key Transaction Terms (1) If the transaction closes later than 12/31/16, Arch will retain all the economics for business relating to policy years 2017 and onwards (2) Subject to fixed-value collar structure where AIG will receive (subject to certain adjustments if Arch issues common shares prior
Slide 10: Stock Consideration and Transaction Consideration Mix
Stock Consideration 11 Transaction Consideration Mix Details Cash Consideration $1.375 billion bridge facility in place at signing 1 2 ($ in millions) (1) Includes potential $200 million drawdown on Arch’s existing revolving credit facility. (2) Convertible into Arch common shares on a one-to-one ba
Slide 11: Conclusion
12 Conclusion Further builds Arch’s cycle management capabilities by deploying capital and dedicating intellectual resources to business segments with the best relative returns Expands scale of Arch MI by uniting UGC’s leading position with Arch MI’s financial strength and history of innovation, cre
Slide 12: Investor Inquiries
archcapgroup.com Mark D. Lyons Executive Vice President and Chief Financial Officer Arch Capital Group Ltd. Waterloo House, Ground Floor 100 Pitts Bay Road Pembroke HM 08 Bermuda (441) 278-9250 MLyons@archcapgroup.com Donald Watson Executive Vice President, Financial Services Arch Capital Services I
Slide 13: > BS * Arch
> BS * Arch Mark D. Lyons Executive Vice President and Chief Financial Officer Arch Capital Group Ltd. Waterloo House, Ground Floor 100 Pitts Bay Road Pembroke HM 08 Bermuda (441) 278-9250 MLyons@archcapgroup.com Investor Inquiries: Donald Watson Executive Vice President, Financial Services Arch Cap
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